With the economic situation in Australia in the past months, high inflation, consumer rate hikes, unstable labour market, and higher interest rates, small businesses are usually the ones hit hard and low. The global events happening are influencing the economy, and smaller businesses often suffer from serious financial struggles.
Despite all the negativity, small and medium businesses remain optimistic, keeping their financial spirits high. In order to cope with the current situation, they carefully plan their business operations.
Common Struggles of Small Businesses
Anywhere in the world, small businesses are always considered the backbone of the economy. And true enough, many of them are still in survival mode despite the prolonged economic challenges brought about by the pandemic, war, and increasing inflation.
It is said that when businesses do not spend, the economy weakens. When businesses shut down, many get unemployed.
To be fair, struggles are inevitable for all kinds of businesses. However, small to medium enterprises are more susceptible to these financial challenges, made worse by the current global situation.
Let’s understand what common struggles they face, and later let’s figure out how to overcome them strategically.
- Drop in Revenue
With changes in protocols because of the pandemic, such as limiting store capacities to observe health and safety protocols, some businesses are forced to operate despite a drop in revenue. Lower household spending caused by inflation and unemployment intensifies the situation even further.In fact, the past year 2021 has recorded a sharp decrease in revenue and sales among small businesses in the country based on the Australian Bureau of Statistics’ report.
- Shortage in Cash Flow
With a drop in revenue, ultimately cash flow is also affected. It’s difficult for businesses to continue when they’re losing financial resources. Some companies had already used up their emergency funds when the pandemic hit in 2020, and are still struggling to recover up until now.Some small businesses temporarily closed, and reopened when the economic situation got better. But not all are able to go back to “business as usual” since shortage in cash flow is still a problem.
- Access to Additional Capital
One of the biggest challenges for small to medium enterprises is having access to additional capital for them to stay in operations. Most businesses have emergency funds, but the problem is they can only be sustained for a few months.With unceasing operating expenses, like rent, bills, loan payment, and employees’ salaries, getting additional capital just becomes even more difficult to achieve.
To add insult to injury, high interest rates also makes it harder for small businesses to get a loan.
- Shifting to Digital
The pandemic proved that businesses who were ready to transition smoothly to a digital market could flourish. But undeniably, most small to medium businesses could not afford to quickly shift to digital transactions as it also requires money to make it fully operational.Apart from money, shifting to digital also requires in-depth research and planning to make it work. Sadly, not all businesses are capable of that. Small businesses just could not afford to completely transition to digital business.
It’s common for small and medium businesses to experience financial struggles. Although dealing with this difficult situation can be difficult, you do not need to do it alone. Expert coaches at DDDC Finance can assist you in planning your next step in running your business, as well as help you strategize more effectively during times of pandemics.
Rebuilding Your Financial Spirit in Business
Small to medium enterprises (SMEs) are known for being innovative and adaptive. Regardless of our current situation, many business owners are finding ways on how to operate again or re-open their business. It is important to have a recovery plan to establish new normal operations.
A Financial Spirit Recovery Plan is vital so that you know what to do to rebuild your business during the pandemic and when the pandemic ends. Maintaining a positive financial spirit despite our situation is hard but not impossible.
Check this helpful guide on how to put your small business back on track.
- Know and understand your financial damage
First step in rebuilding your financial spirit is making an assessment of your financial damage. Update your financial statement to know your cash flow, and compare your latest statement to the previous year to determine your losses. - Get additional funds to recover
Small businesses need additional capital to re-start their business. But you need to decide on this carefully since getting a business loan has its pros and cons. Consult with an expert first, so you know which way best suits your financial situation to fund your business. - Make a timeline for rebuilding your financial spirit
Doing all things at once is not realistic. Several things may need to be done to help you recover your finances, but know first what’s most important. Track your progress as you take small steps. Identify which processes are delivering solid results by checking weekly. Over time, as business operations normalise, move to a monthly basis. - Create a contingency plan for the next crisis
Nothing beats being ready for anything. While we do not hope for another financial emergency, it’s always better to plan ahead to protect your business from future crises. An example of this can be creating liquid cash savings. Use your experience during this current crisis in preparing your business operation.
The more out of the box ideas you have, the better… so you can prepare for the worst scenarios.
There is no way of knowing what will happen next year or in the future. But it is best to always be prepared for those uncertainties to make sure our businesses can overcome any crisis.
